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Reporting on key macro data at the time of release.
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REALITY CHECK: China's consumer price index should edge higher again in May, pushing further into positive territory, as services and goods prices extend gains as social restrictions ease and higher raw material costs work through, largely offsetting declining food prices, analysts told MNI. "CPI may rise to 1.6% (y/y) from April's 0.9% gain due to the low comparison base for the same period last year," said Wang Jingwen, a senior researcher at the Pangoal Institution, although on a monthly basis, CPI may continue to decline given the large month-over-month decline in food prices.
DATA: China's exports rose 27.9% y/y in May driven by growing demand from European countries and the U.S. and greater shipments of labour intensive as well as mechanical and electrical products although the pace slowed from the 32.3% rise recorded in April, data from the General Administration of Customs showed on Monday. Imports rose 51.1% y/y in May, faster than the 43.1% growth recorded in April, driven by commodities such as iron and ore, soybeans and crude oil.
LIQUIDITY: The People's Bank of China (PBOC) injected CNY10 billion via 7-day reverse repos with the rate unchanged at 2.2%. The operation left liquidity unchanged given it netted off CNY10 billion reverse repos maturing today, according to Wind Information. The operation aims to keep liquidity reasonable and ample, the PBOC said on its website.
RATES: The seven-day weighted average interbank repo rate for depository institutions (DR007) rose to 2.2790% from 2.1741% on Friday, Wind Information showed. The overnight repo average increased to 2.3092% from the previous 2.1830%.
YUAN: The currency weakened to 6.3961 against the dollar from 6.4092 on Friday. The PBOC set the dollar-yuan central parity rate lower at 6.3963, compared with the 6.4072 set on Friday.
BONDS: The yield on 10-year China Government Bond was last at 3.1400%, up from 3.1250% on Friday, according to Wind Information.
STOCKS: The Shanghai Composite Index edged up 0.21% to 3,599.54 while the CSI300 index lost 0.09% to 5,277.63. Hang Seng Index edged down 0.45% to 28,787.28.
FROM THE PRESS: China should launch yuan futures trading right away to help regulators to counter attacks on its currency and improve risk prevention amid the further opening of the financial market, wrote Guan Tao, chief economist at BOC International and a former forex regulatory official at a blog post on Yicai.com. The introduction of yuan futures is also a viable measure for small and medium exporters to avoid profit loss amid yuan appreciation and reduce forward contract hedging costs, said Guan. This can greatly expand the scope of participants with different risk appetites in the yuan FX market, said Guan, noting that this round of yuan's surge was pushed by the market's expectation of yuan appreciation.
The PBOC aims to require mandatory disclosures of climate-rated information, forcing major domestic commercial banks and listed companies to disclose carbon information and activities, said PBOC Governor Yi Gang at a conference hosted by the Bank for International Settlements, the 21st Century Business Herald reported. China has begun to conduct climate stress tests on the financial system to identify institutions most vulnerable to climate change, said Yi. The PBOC is trying to evaluate the green and brown assets of commercial banks, and will set the deadline for the green transformation of banks, said Yi.
The opening of the southbound link of China's Bond Connect scheme, which will give mainland investors a new outbound channel to buy bonds in Hong Kong, may be expected as the country steadily pushes forward the two-way opening of its financial market, the China Securities Journal reported. The PBOC and FX regulator will have a series of new measures centered on the high-level opening of capital accounts to balance cross-border capital flows, the newspaper cited Guan Tao, chief economist of BOC International as saying. The newspaper reported last December that the PBOC is discussing a framework of the southbound link with the Hong Kong Monetary Authority.